In the year of 2016, Equity markets around the globe were having a Roller coaster ride with a rally in start of the year in anticipation of good economy growth around where bars were raised of Global economy growth. But then BREXIT referendum in June mashed up with the rally and second half of the year was a bit nervous until 9th Nov. On the 9th day of November, Mr. Trump surprisingly won presidential elections in US which changed winds for equity markets.
Above chart is a weekly chart of DOW Index and we could notice that post 23 June, BREXIT Referendum week, we saw some profit booking while then from 9th Nov, trump win, we have got 17% rally in equity markets. The rally was in anticipation of reforms which was promised by him during campaign but his report card on 100th Day on Friday was not cheering for many economist.
Some of the achievements which he mentioned for 100th day were efforts to roll back Obama Care, steps taken to control criminal activities, answer to chemical attack, some steps to stop trade with Mexico and Promoting Made in the USA. But why were economist not happy? Because nothing has changed the world for financial market as another promises such as spending in investment, Tax cut and financial reforms have not been implemented. Rally of 17% in equity markets have been in just anticipation of good reforms but statistics is not showing in improvement. Consumer confidence index has started losing which means now US citizen’s hopes in Trump is fading away. As you all can notice in the graph below, that consumer confidence was at just 88 before trump win but it than zoomed to 99 in Jan but than took a dip to 96.
To gain back confidence, Trump must implement tax cut asap which could be cheerful amongst citizens and industrialists. But he is now stuck between his words (where he promised tax cut in campaign) and fear of widening of fiscal deficit due to tax cut. So that this the reason why he is still spending some more time before he takes any steps in form of tax cut.
Another factor which has not supported economy in Q1 has been personal expenditure which has been in decreasing state which means consumers have been saving more than spending.
Economic barometer index of US,GDP, has been in falling trend since Mr. Trump has joined the party. So now Mr. Trump has get some quick reforms to show world some results on financial stats. Until now rally was just based on liquidity and consumer expectations but now if we need any rally, it should be on improving fundamentals and not just liquidity.
Technically, DOW has given a breakout on weekly charts from a pattern for a rally but if we get any fear of war than things might change. But world shouldnt wait for any result of War because that’s uncertainty and no one can predict. Its better to buy on each dips in equity markets because next few years its going to be for finance if the trump gets everything right. And I believe we must give some more time than just 100 days to judge him.